In these strange times where Facebook employees can’t get into their own building because of some technical issue, and half the world has to resort to the indignity of SMS because WhatsApp is down, I bring you some observations on which companies have fared the worst over the past 52 weeks.
In general, the list contains a lot of gold and silver miners that have done the worst, coupled with some biotechnology companies. Marijuana has also not done very well.
I try to avoid gold mining companies like the plague and hence I do not really want to dive into any of them, but notable names which stood out include New Gold (TSX: NGD), Sandstorm (TSX: SSL) and an old friend in Gran Colombia Gold (TSX: GCM).
Outside of this sector, the known and recognizable names on the loser lists is quite sparse. Mediagrif, now mdf (TSX: MDF) is a company that I’ve looked at in the past but have not invested in them. They were a fairly benign SaaS company (probably their most known software offering was MerX) that recently executed on a large-scale acquisition last August with a subsequent equity offering. This acquisition sucked up the cash on their balance sheet and added some leverage to purchase a company that is barely profitable. Large acquisitions very rarely work out and the stock price is certainly reflecting this. People tend to view the entire SaaS sector monotonically when in reality, there are huge valuation rifts between various software offerings – you can’t simply slap on a Constellation Software-sized price to sales ratio on every company that does SaaS!
Another name which caught my attention was MAV Beauty Brands (TSX: MAV). This is a branding reseller company (i.e. take generic products, put a brand label on them, and get them on the shelves of stores). Some of you may guess that I am not the biggest consumer of hair products. You would likely see this company represented in the shelves of Shopper’s Drug Mart. The company is mildly profitable, but they’re not exactly in the best competitive position – just go to the hair-care section at the store and you’ll see why. At a market cap of CAD$90 million they might seem cheap, but they also have a US$140 million term loan to deal with which really guts the valuation proposition.
Moving further down the list of 1-year losers, we have Ballard (TSX: BLDP) which I won’t dissect further – they continue to execute on their very successful business model of raising equity financing every decade when there is hype regarding hydrogen power: “On February 23, 2021, the Corporation completed a bought deal offering with a syndicate of financial institutions for 14,870,000 shares of the Corporation at $37.00 per share, resulting in gross offering proceeds of $550,190,000 and net offering proceeds of $527,291,000” – this will last them another 6 or 7 years!.
The first name which got me legitimately interested was Richards Packaging Income Fund (TSX: RPI.UN), which looked like they were a somewhat-COVID victim, but upon subsequent research I also tossed this one in the discards pile. If they were trading at half of what they were currently, I might have been more interested.
We all remember the toilet paper craze from Covid-19 and KP Tissue (TSX: KPT) was one of the companies that benefited from Covid-19. No longer – you can take a look at them now. They are an extremely leveraged entity.
Finally, something else that caught my attention was Saputo (TSX: SAP), the dairy conglomerate, and they are reaching 52-week lows and are likely candidates for year-end tax-loss selling. Covid-19 has disrupted the business and its profitability. While the stock is still at a healthy price, if it depreciates by another 1/3rd or so, it may get into value territory. Dairy is effectively controlled and protected in Canada by Saputo, Agropur (a co-op) and Parmalat (European-owned), which gives it some monopoly-type characteristics.
Overall, the pickings are very, very slim. The companies that have dropped over the past 52 weeks have really done so for proper reasons. I’m not finding a lot of value out there, and the low P/E names are mostly in the fossil fuel space and they have appreciated extremely.
CTC.a at 6 month low and likely dividend increase in Nov (currently 2.6%)
Over the past 52 weeks they’re up from roughly 140 to 180 today. Haven’t done the year-to-date lists for this post.
I’d add Stella Jones (SJ) to the list – they are -12% year-to-year, might be a good defensive catch if they go down further. I expect their business to boom, especially once that infrastructure plan is approved in the US.